GM signs agreement to acquire Daewoo Motor, gains important production foothold in Asia
Monday, April 29th 2002, 12:00 am
By: News On 6
SEOUL, South Korea (AP) _ General Motors Corp. signed a final deal Tuesday to acquire parts of South Korea's Daewoo Motor Co., gaining an important production foothold in the fast-growing Asian market.
The deal was signed by GM Chairman John F. Smith, Daewoo President Chairman Lee Jong-dae and Jung Keun-young, head of the state-run Korea Development Bank _ the South Korean automaker's main creditor bank.
``GM's investment in this new company allows us to participate in the important South Korean market, and share in the benefits associated with Daewoo's outstanding product development and manufacturing capabilities,'' Smith said in a statement.
The signing capped seven months of tough negotiations. The last obstacle was lifted two weeks ago after Daewoo workers voted for the sale of their company's key assets to the U.S. carmaker.
About 60 labor unionists opposed to the deal occupied the hotel conference room where the signing was scheduled to take place, forcing executives to hold the event an hour later at the offices of Korea Development Bank.
Workers had held violent protests against a GM takeover, which they feared would lead to mass layoffs. The union backed away from its opposition after GM promised to maintain employment at current levels and offered to rehire 300 workers who had been laid off.
Under the deal, GM will become one of several investors with a financial interest in a newly established company to which Daewoo would sell some of its assets.
The deal requires GM to invest $400 million for a 67 percent stake in the new company, with the remaining 33 percent to be held by Daewoo creditors, who will invest $197 million. The transition is expected to take two to three months, according to a joint statement.
Officials of GM and Daewoo said the new company anticipates annual revenues of about $5 billion.
The deal has symbolic significance for the South Korean government, serving as a litmus test of its resolve to restructure the corporate sector following the 1997-98 Asian financial crisis.
Daewoo Motor was declared bankrupt in 2000 with an estimated debt of $17 billion after years of reckless expansion on borrowed money.
Assets to be contributed to the new company include three manufacturing plants _ two in South Korea and one in Vietnam _ and nine sales subsidiaries in Puerto Rico and European countries, including Austria, France, Germany, Italy, Spain, Switzerland and the Netherlands.
Daewoo's main plant in Bupyong, west of Seoul, will supply the new company with vehicles, engines and other components for at least six years. If the Bupyong plant proves productive, the GM-controlled company will consider its acquisition.